Sec. 201 Tax treatment of income share agreements
Exclusion from gross income of income share agreement proceeds— Payments made under an income share agreement to or on behalf of the individual who commits to pay a specified percentage of such individual’s future income to another person under such agreement shall not be includible in the gross income of such individual for purposes of the Internal Revenue Code of 1986.
Treatment of payments of future income— Payments of future income received by another person under an income share agreement shall be treated for purposes of the Internal Revenue Code of 1986—
first, with respect to so much of such payments as does not exceed the amount of the payments to which subsection (a) applies with respect to such agreement, as a repayment of investment in the contract which reduces the holder’s basis in such agreement, and
second, as interest which is includible in gross income.
Income share agreement— For purposes of this title, the term income share agreement has the meaning given such term under title I.